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Why Starbucks is Not Acquiring Peet's Coffee, But a German Conglomerate Is

Shareholders in gourmet coffee roaster Peet’s Coffe & Tea Inc. got a venti surprise this morning — the news that Peet’s is being acquired at a nearly 30 percent premium over the company’s recent stock price and $1 billion in total deal value. The weird thing is who the buyer is: German conglomerate Joh.A. Benckiser, owner of perfume icon Coty, Jimmy Choo shoes and other luxury brands.

The question on the lips of many — why isn’t Starbucks the buyer? Well, there are good reasons why the java giant has stayed away from this deal, and probably won’t be prepping a counter-offer. A few:

Less brand value. Starbucks is one of the best-known American brands worldwide. The company doesn’t need to try to promote a second, less-known brand. If Peet’s is a more exclusive brand, well, Starbucks can create those itself.

Unneeded real estate. Starbucks just spent several years on its own turnaround plan after getting too aggressive on store openings. The last thing they’d need is to be saddled with more than 200 more stores with locations not of their choosing. They don’t need to pay $1 billion just to shut that competition down, either.

Not a complimentary product. Starbucks has a sharp eye for complimentary products it can acquire, such as Tazo Tea and its recent purchase of La Boulange bakery. But Peet’s coffee is well, more coffee. Starbucks — they got that already.

Now that we’ve got that cleared up, let’s look at the company Peet’s has presented to its shareholders as the done-deal buyer for Peet’s. After a couple of decades spent watching retail M&A deals go down, I see a pattern: Strong foodservice brands tend to get acquired by foodservice conglomerates, where the new owner has obvious synergies they can apply to the newcomer from their other brands.

Think of Yum! Brands owning Taco Bell, KFC, and Pizza Hut, for instance. The parent knows how to run fast-food restaurants and can apply their expertise across all its brands and share best practices. Makes sense, yes?

Peet’s acquirer, Benckiser, has many sold-gold brand names under its wing, but they’re in apparel and fragrance. They don’t have any other food or beverage brands in their stable. What does that mean? Likely, Peet’s couldn’t find a more natural foodservice fit with another buyer.

Let’s face it — American foodservice companies haven’t generally flourished under the stewardship of some distant European owner. I’m thinking of the unhappy period when Burger King was owned by Diageo, for just one example.

There are rumblings that shareholders may object, given that the acquisition price is only what their shares were worth just a few months back, or that another offer from a more obvious match such as Kraft Foods may come along. If the latter happens, Peet’s should take a hard look at it, as a parent with deep foodservice experience would be preferable.

The mystery question here really is what Benckiser wants with Peet’s. Will there be gourmet coffee stands in the Jimmy Choo boutiques at Neiman Marcus next? Maybe, but probably not. It’s more likely this is a straightforward bet that Peet’s fortunes will improve in a few years and Benckiser can reap a nice profit selling it back off again.

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So, instead Sbux pays $100M for 19 locations in San Francisco ($5M per location) instead of $1B for 200 locations. My guess is that Sbux corp is steaming at missing out on the opportunity.

Peets would have been complimentary La Boulange. I’m surprised that the article doesn’t cover both sides of the acquisition story from both perspectives, Sbux and Peets. Seems like somebody is sour grapes….and this article has the appearance of attempting to save Sbux face when everyone in the F&B world knows that this is mud on Sbux face.

Starbucks has absolutely no desire to turn out a quality product. They get the bottom grade coffees from every region and roast the crap out of them to cover up the lack of basic quality. It doesn’t take a lab, it takes people with taste buds who actually care about taste

Truth to be told the Reimann Family is an enigma in Germany. These Reimann people live a very secret life, nobody knows their true identity or how they look like. Only the managers of their trust are public people. You cannot approach them an I live just 80 miles away from their estate. Think about the german conglomerate in “Breaking Bad”. They are awashed in cash, and due to the unsuccessful bid for another american company some weeks ago, they had no more time left. They needed to spent the cash, as the Euro crisis drags on. There is a real danger that if the euro crisis goes really bad, all that money could become worthless paper. Lehmann would be a minor act in comparision. It is not hard to spend a few millions to turn a profit. When you are talking billions it is much much harder. Ask the “Sage of Omaha” who for years has asked the Röchling Family of Mannheim to give up on RHEINMETALL.

Starbucks will never aquire Peet’s due to its history. A quick look at the Peet’s website gives you this ” Alfred Peet. .. mentored and inspired a generation ofcoffee entrepreneurs,including the founders of Starbucks,whom he supplied with Peet’sroasted beans during their firstyearsof operation.”

At this point it would be like a second rate fast food chain buying the gourmet food line that inspired it.